Board logo

Record energy company profits
tegwin - 2/8/22 at 07:10 AM

Don’t want this to turn into a doom and gloom thread but I have a genuine question…..

There have been lots of articles recently like this one saying how record profit is being made by the energy companies…. What I don’t understand is how?

https://www.bbc.co.uk/news/business-62382624

We’re being told there is a shortage and the cost of production etc is going up but I don’t get why consumer prices need to rise so much when the level of profit is shooting up too. Smacks to me of pure greed and little else.

Seems almost criminal to use the current world situation as an excuse for profiteering……. I get that this is how capitalism works but are there any mechanisms other than common decency that would force companies to stop it?


JAG - 2/8/22 at 08:11 AM

quote:

Smacks to me of pure greed and little else



I think that's exactly what it is - the energy companies are seeing a reduction in supply (Russia reducing gas supplied to the world) and are using that as an excuse to increase prices to increase their profits. It's a real world application of the traditional supply Vs demand model.

Supply has been reduced but demand is the same (possibly increasing) - hence prices will rise.

Cynical move by the energy companies - Yes

Immoral move by the energy companies - Yes

Unexpected move by the energy companies - No (we all know how big businesses behave!)


SJ - 2/8/22 at 08:44 AM

quote:
Originally posted by JAG
quote:

Smacks to me of pure greed and little else



I think that's exactly what it is - the energy companies are seeing a reduction in supply (Russia reducing gas supplied to the world) and are using that as an excuse to increase prices to increase their profits. It's a real world application of the traditional supply Vs demand model.

Supply has been reduced but demand is the same (possibly increasing) - hence prices will rise.

Cynical move by the energy companies - Yes

Immoral move by the energy companies - Yes

Unexpected move by the energy companies - No (we all know how big businesses behave!)


All a function of a lack of effective competition in the market.


obfripper - 2/8/22 at 10:24 AM

You've also got the saudi's selling us oil at an inflated rate while at the same time they're buying it off the russians at a discounted rate, yet there doesn't seem to be much fuss made over their actions.

Dave


nick205 - 2/8/22 at 10:54 AM

quote:
Originally posted by SJ
quote:
Originally posted by JAG
quote:

Smacks to me of pure greed and little else



I think that's exactly what it is - the energy companies are seeing a reduction in supply (Russia reducing gas supplied to the world) and are using that as an excuse to increase prices to increase their profits. It's a real world application of the traditional supply Vs demand model.

Supply has been reduced but demand is the same (possibly increasing) - hence prices will rise.

Cynical move by the energy companies - Yes

Immoral move by the energy companies - Yes

Unexpected move by the energy companies - No (we all know how big businesses behave!)


All a function of a lack of effective competition in the market.




I find myself nodding in agreement here!

Besides looking at ways to reduce household energy and water use I also find myself wondering again about solar. I know several on here already have it and more seem to be considering too.


Simon - 2/8/22 at 12:49 PM

It's mostly a scam to rip the consumer off.

The last time crude got around $130/barrel, retail never went much above £1.4/litre.


nick205 - 2/8/22 at 02:17 PM

quote:
Originally posted by Simon
It's mostly a scam to rip the consumer off.

The last time crude got around $130/barrel, retail never went much above £1.4/litre.



I remember fuel (diesel in my case) getting to £1.4x/litre. Filling the car seemed damned expensive (cheaper than now though). At that point I was driving a company car and doing a lot of company miles. The government didn't adjust their official pence/mile claim rate up to account for the fuel price rise. I know many company milers were having to crunch the numbers pretty harshly to make it work. No fuel card in my case it was pay out of your pocket then claim it back.


Schrodinger - 2/8/22 at 03:35 PM

I think you need to be sure you are comparing "apples" with "apples", BP for instance makes the majority of their money and therefore profits by extracting oil and gas from the ground and then selling it on the world market and as I understand it only about 10% of their profits come from the UK. Also British Gas who have to buy on the world market have returned reduced profits in the last quarter, so it's not all as simple as it first seems.


coyoteboy - 2/8/22 at 04:11 PM

quote:

British Gas owner Centrica said adjusted operating profit for the six months ending in June rose to £1.34bn from £262m a year earlier.

The rise in profits came from the company's nuclear and oil and gas business, rather than from the British Gas energy supply business which performed much worse. Many firms have been unable to fully pass on the rise in wholesale gas prices to customers.



Looks like providing you're in the energy business, you're profiting from the price hike. Sure one arm might have to pay more for gas on the market, but the other is raking it in. I find it hard to weep for any business that posts its profits in the billions while individuals they serve decide whether to eat that day.

[Edited on 2/8/22 by coyoteboy]


Shooter63 - 13/8/22 at 05:34 PM

Unfortunately the main reason for the high NG price is our European chums and especially Germany who have relied on cheap NG from Russia to power their industry and is also the reason why Europe has been dragging its heals regarding sanctions against Russia, Germany's problem is compounded by the fact that they have a large green party presence politically who are dead set on not allowing their nuclear power stations to stay on line, I can see NG prices staying high for a long time and I think the political powers in this country think the same, there are a few dirty rumours going about regarding the cost of converting our gas powered stations over to coal, but you can guess the back lash from the enviro movement. My house is old and not well insulated, I'm giving serious thought about going over to oil fired heating and water, as the price of crude is and will come off. If your house is new and well insulated give a thought to going over to electric powered central heating and fitting PV panels.

Shooter